All we can really see is what’s a few feet in front of us, but hopefully we’ve learned from everything behind us. When it comes to Real Estate anywhere, and Central Oregon is no exception, we can predict the next few weeks with accuracy, but that’s about it. However, hopefully we have also learned from the past to help us be a bit wiser moving forward.
As for the next few weeks, we see the continued climb of interest rates as well as more sellers wanting to take advantage of the market. Those two things will slow demand and increase inventory, which should begin to push us towards a healthier market and slow appreciation – like all the experts say will happen this year. This is expected to be a gradual process, and should still be a solid seller’s market for the foreseeable future.
Hopefully we have learned enough from past experiences to know that we can’t predict the future very well, so being conservative is probably our best bet. That being said, it’s also wise to look for indicators of trouble ahead, in order to be as prepared as possible. Here’s what we see happening in our Country and in Central Oregon:
1 – Housing Supply
The difference between 2007 and now is that the main factor currently pushing up our prices is a serious lack of inventory (homes to sell in relation to buyer demand). In 2022, our increase in price has been because of basic economics: supply and demand. As supply goes down but demand stays high, our prices naturally go up. As an example, some areas of Bend have well less than a month of inventory, when they should have at least 3 months to be considered approaching a healthy market. In 2007, inventory was oddly high but prices continued to climb, which is very much out of the ordinary.
2 – Housing Demand
It has been said that in the early to mid 2000’s demand was fueled by poor mortgage standards and FOMO (fear of missing out). We can now say with complete certainty that we are fueled today by much more stringent mortgage standards and fear of doing something foolish is much stronger than FOMO these days, with 2007 still in most of our minds. Two other factors that greatly added to our demand are what were historically low interest rates and the rise in rents. These factors point to the stability and wise financial planning of owning your own home.
3 – Equity
In the words of KCM, many Americans were “using their home like an ATM…” taking money out left and right to buy whatever. These days, many more are keeping their equity right where it is. In the past, this “ATM mindset” led to many homes being in a negative equity situation where more money was owed on the home than it was actually worth, which is obviously not a favorable scenario. However, most people had no idea the bottom would soon fall out and their home would be worth far less than expected.
Today has proven to be much different with cash out refinances being far less common than they were and, in 2021 alone, the average homeowner in the U.S. gained $56,700 in equity (probably slightly more than that in Central Oregon).
It goes without saying, but a stable positive equity position for homeowners is a much better place to be than under water – or at least close to it.
All that said, we appear to be much better off than before. We have learned from the past, and at least the next few feet in front of us look clear. Experts in Real Estate, Economics, and Finance anticipate slowed appreciation (not depreciation) and what appears to be a path towards a more stable, healthier market. But, as previously mentioned, it is anticipated to happen slowly, and the next little while still looks like the power is in the hands of the seller.
Things will certainly change as we continue down the road. The only certain constant is change. But the best guesses of the experts are that we will slowly cool down, not crash, not pop. We have certainly felt, here in Central Oregon, a bit of a hesitation as we approached Spring. Interest rates jump, snow still falls, and big things happen across the world – but our years of experience tell us we will endure a little slowing as the market catches its breath, but then we’ll coast back into a slightly healthier market as the Summer of 2022 passes.